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Wealth Update – Successor Owners and Annuitants vs. Beneficiaries

As promised in last week’s newsletter, this week we’re going to look at successor owners and annuitants.

As a reminder,

  • A successor owner is a person who will take over ownership of the contract in the event of the primary owner’s death.

  • A successor annuitant is an individual upon whom the benefits will be based after the primary annuitant’s death.

Regarding successor owners, there are a couple of things to consider, no death benefit is paid when an owner dies, as this benefit is based on the annuitant. And, there could be tax implications for both the deceased’s estate and the new owner when the primary owner passes away. The tax issues should be reviewed with an accountant to make sure the contract is set up properly.

Successor annuitants also require consideration before they are chosen. I did a quick survey of our providers to see how the death benefit process works when there is a successor annuitant. My question to them was: “In the case where the market value is less than the guaranteed minimum death benefit at the time of the primary annuitant’s death, is the account topped up before the successor annuitant takes over?” The answer I got back was no, except for Industrial Alliance, the market value carries on under the successor annuitant, and there is no top-up. The only time a top-up will occur (if required) is at the time of the death of the successor annuitant.

Bearing this in mind, I suggest couples do not use a successor owner/annuitants for registered investments (RRSPs, LIRAs, RRIFs, LIFs and TFSAs) unless there is a compelling reason to do so. Under our tax regime, all registered contracts can be rolled over to a surviving spouse, which will defer estate taxation until the surviving spouse passes away.

Next week, I’ll discuss the potential benefits for couples naming each other as successor owners and successor annuitants on non-registered segregated fund accounts.

As always, I look forward to your thoughts.

Scott Edgington, CEA

Director, Advanced Planning, Wealth

Qualified Financial Services

This communication reflects the views of Qualified Financial Services Inc. as of the date published. The information in this publication is for general information purposes only and is not to be construed as providing individual legal, tax, financial or other professional advice. Qualified Financial Services Inc. assumes no responsibility for any errors or omissions in the information contained herein nor for any reliance placed on such information. Please seek independent professional advice before making any decisions.


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